Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / Private Equity Is Buying Up Independent Insurance Adjusters
Transcript
- Lucas: So Luna, you know how we've spent the past twenty episodes watching private equity buy up everything from veterinary clinics to freight brokerages. There's one corner of the insurance world that's been flying under the radar, and it's starting to heat up in a big way. Luna: You're talking about the claims side, right? The actual adjusters who come out after a storm or a fire? Lucas: Exactly. Independent adjusting firms — the companies that insurance carriers hire to handle claims when their own staff is overwhelmed. Think catastrophe response after a hurricane, or a steady stream of auto and property claims. These used to be mom and pop operations, but private equity is now rolling them up at a pace we haven't seen before. Luna: And you've got a specific deal in mind, I assume. Lucas: The one that really put this on the map was the acquisition of Crawford & Company last year. That's one of the biggest independent claims management firms in the world. A consortium of private equity firms took it private for roughly one point seven billion dollars. And that wasn't just a blip — it's a signal. Luna: One point seven billion. That's not a mom and pop shop. So why would PE want a claims processor? Lucas: Because it's countercyclical, for one thing. When the economy tanks, people still get in car accidents, houses still get damaged, and insurance companies still need to settle claims. That's a pretty stable revenue stream. But the bigger story is the fragmentation. There are thousands of small independent adjusting firms across the U.S., and they're aging out. The average age of a licensed adjuster is somewhere in the mid-fifties. Luna: So it's a classic roll-up play — buy up these small firms, consolidate the back office, and dominate a fragmented market. Lucas: Right. And there's a labor shortage that makes consolidation even more attractive. There simply aren't enough new adjusters coming in to replace the ones retiring. A big pe backed platform can invest in training, in software, in a national network — things a solo adjuster can't do. Luna: I remember reading that after Hurricane Ian in 2022, some carriers were waiting months to get claims settled because there just weren't enough boots on the ground. That's the kind of pain point PE loves. Lucas: Exactly. And that's why you're seeing not just Crawford, but a whole slew of mid-sized adjusting firms getting acquired. There was a deal earlier this year where a PE firm snapped up a regional catastrophe adjusting company in the Southeast for about two hundred million dollars. The founder was in his sixties and wanted to cash out. It's happening all over. Luna: So what does that mean for the actual claims process? If a fund owns ten different adjusting firms, does the homeowner notice any difference? Lucas: That's the uncomfortable question. On one hand, consolidation could mean better technology, faster settlements, more consistent training. On the other hand, you're putting a lot of claims handling into fewer hands — and some of those hands are now financially tied to the same funds that also own roofing companies, restoration contractors, even public adjusters. Luna: Wait, that's a real conflict of interest. If the PE fund owns both the adjuster and the contractor, who's actually looking out for the policyholder? Lucas: That's the million-dollar question. There have already been class actions around this in the restoration space. And it's not just about the contractor. Some of these firms are also collecting data on every claim they handle — and that data is gold. You can build predictive models for fraud, for litigation risk, for what a claim is actually worth. The adjuster is sitting on a mountain of proprietary information. Luna: So it's not just about settling claims faster — it's about owning the data pipeline. Lucas: Exactly. And that's why you're seeing insurance carriers themselves start to get nervous. They've been outsourcing claims for decades, but now they're wondering if they've handed over the keys to the castle. If a pe backed adjuster also owns the data on every claim, they could potentially dictate terms to the carriers. Luna: That sounds like a power shift. Before, the adjuster was just a vendor. Now they're a strategic player? Lucas: And that's the angle we're drilling into today. Because if you're a small adjuster or someone thinking about a career in claims, this changes the game. And for the rest of us, it's worth understanding how your insurance claim might be handled by a firm that's owned by a private equity fund. Luna: Before we get deeper into the numbers, I want to pause for a second. If today's episode gives you a new way to think about the insurance industry — and I think it does — the way these conversations stay free is listener support. It's the same model we've always had: no ads, no sponsors, just people who find value here pitching in. If that's you, you can buy me a coffee at buy me a coffee dot com slash fexingo. It's a small way to keep these shows going. Lucas: And we genuinely mean it — every little bit helps us keep doing the deep dives. Now, let's get back to the economics. The key number here is the total addressable market for claims management. Estimates put it at around thirty billion dollars a year in the U.S. alone. Luna: Thirty billion. And how much of that is currently outsourced to independents? Lucas: Roughly a third. The rest is handled in-house by carriers. But that split is shifting. As claims get more complex — think cyber, think extreme weather — carriers are increasingly relying on specialists. And those specialists are getting bought up. Luna: So it's a growth market, which explains the premium PE is willing to pay. What kind of multiples are we talking about? Lucas: I've seen deals at eight to ten times EBITDA, which is on the higher end for a services business. The buyer is paying for the data, the client relationships, and the ability to cross-sell other services like managed repair or fraud detection. Luna: That's a lot of faith in the future. But what could go wrong? I mean, there's always a catch with these roll-ups. Lucas: The biggest risk is the people. Adjusting is a relationship business. If the senior adjusters leave because they don't like the new corporate overlords, the clients leave too. There have been cases where a PE firm bought a firm and the entire claims team walked out within a year. Luna: So the value is really in the human capital, not just the contracts. Lucas: That's why you're seeing PE firms hold onto the founder as a consultant or keep the brand name. It's a tricky dance. But the other risk is regulatory. States have different rules about who can adjust a claim, and some are starting to look at the concentration of ownership. There was a bill proposed in Florida last year that would have required more disclosure when a fund-owned adjuster is handling a claim. Luna: That didn't go anywhere, right? Lucas: It didn't pass, but it shows the direction of travel. Consumer advocates are worried about the conflict of interest problem. And I think that's the thread we should pull on — what does this mean for the person filing a claim? Luna: I've seen some horror stories online, but I want to hear your take. Is the average homeowner actually worse off? Lucas: Not necessarily worse off, but they should be more careful. When a adjuster shows up after a hurricane, they're not necessarily working for you — they're working for the insurance company, or in this case, for the PE fund that owns the adjusting firm. That's always been true, but now the incentives are murkier because the fund might also own the repair company that gives you a quote. Luna: So if the adjuster says 'this will cost twenty thousand to fix,' and the repair company is also owned by the same fund, you have to wonder if they're padding the estimate. Lucas: Exactly. And that's why there are firms like public adjusters who work for the policyholder. They take a cut of the claim. But they're also getting bought up. There was a deal last year where a large pe backed platform acquired a chain of public adjusting firms. So now you have the same fund on both sides of the table. Luna: That seems like a problem regulators should be looking at. Lucas: They are, slowly. But the industry is self-regulated in many ways. The adjuster licensing is state-by-state, and there's no federal oversight. So the PE firms are moving faster than the rules. Luna: So if I'm a small independent adjuster watching all this, what should I do? Sell? Or stay independent? Lucas: That's the big decision. If you're in your fifties and you've built a book of business, selling to a well-funded platform might be your best exit. But if you're younger and you want to stay independent, you need to differentiate — specialize in a niche like marine claims or cyber, or build a reputation for working with policyholders rather than carriers. Luna: The niche angle seems smart. If you're just a generalist, you're going to get squeezed by the big platforms. Lucas: And that's what we're seeing. There's a growing group of boutique firms that focus on high-value claims, where the personal touch matters. Those are commanding premium rates. But it's not easy — you have to be really good at what you do. Luna: So what's the one thing you want listeners to remember from today? Lucas: That the independent adjusting industry is being quietly consolidated, and that has implications for both the claims experience and the data economy. Next time you file a claim, it's worth asking: who actually works for whom? Luna: That's a good question to keep in your back pocket. Thanks for breaking this down, Lucas. Lucas: Anytime. Until next time, keep your eyes on the claims.